Labor Lens Investing: The Business Case for Fair Labor Investing

This paper describes a promising new effort to fight global labor exploitation using financing strategies to advance and expand the global trend toward fair labor practices. It focuses on private market investment innovations and opportunities, where investors interested in improving global labor conditions while achieving positive financial results are most likely to meet their objectives.

Labor Lens Investing is an investment approach that uses investors’ leverage through supply chains to advance protections of internationally recognized labor rights. Over the past two decades, progress has been made to improve labor standards in global supply chains, including some companies’ responsible sourcing programs, civil society and shareholder advocacy, and regulations in the home markets of major brands, among other factors. However, despite these efforts, poor labor conditions persist in parts of the supply chain in many industries and sourcing countries. An as yet underutilized strategy, Labor Lens Investing aims to improve labor conditions and business outcomes by strategically directing capital to leverage the scale and scope of global supply chains and to generate solid investment results. A small but expanding group of private investors believes that increasing the labor focus of both private and public holdings will result in better business outcomes, better labor conditions, and solid investment returns. That is the Labor Lens Investing hypothesis.

Poor labor conditions in global supply chains offer investment opportunities that private equity and venture capital investors have begun to take seriously, envisioning both robust investment possibilities and promising levers for improving labor standards and conditions. The first wave of Labor Lens investors believes that improving labor conditions will result in more productive and more sustainable businesses, in turn generating positive investment results. While this idea is unproven to date, initial research is promising.

This paper is meant to ground prospective Labor Lens investors in an understanding of market conditions, to show them examples of what is already being done, to inform them about issues they should consider, and to suggest ways that Labor Lens Investing can progress from an emerging niche to a fruitful investment option for mainstream investors.